StanChart markets revenues slide

LONDON, Nov 1 (IFR) - Standard Chartered’s modest 4% rise in revenues in the third quarter from a year ago disappointed investors and raised concerns the bank’s turnaround has stalled.

Asia-focused Standard Chartered on Wednesday said revenues in its financial markets division fell 9% from a year ago to US$663m as it suffered from the same reduced trading activity that hit rival banks last quarter.

Within that, foreign exchange income dipped 4% to US$238m, rates revenue was down 8% at US$172m, commodities fell 29% to US$42m and credit and capital markets revenues dropped 20% to US$90m.

Although that was a better year-on-year performance than many peers - the average fall in fixed income, currency and commodities revenues last quarter for the big five banks was 22% - analysts said it showed the challenging backdrop to improve the unit’s income, a key part of CEO Bill Winters’ turnaround plan.

“The key issue for investors was to see the re-emergence of revenue growth, yet there is none,” said Investec analyst Ian Gordon.

The bank’s corporate finance revenues also fell 14% to US$325m.

Revenues across corporate and institutional banking rose 2% to US$1.63bn, underpinned by a 19% jump in transaction banking income to US$856m.

Finance director Andy Halford said Standard Chartered was making “steady progress” in reviving CIB, including improving efficiency and the quality of clients. That includes hiring staff in the US and other OECD countries as the bank targets 90 new major multinational companies, and Halford said 80 of those had now been ‘onboarded’.

“We’ve done a number of things in terms of tightening up and sharpening up the business,” Halford said in regard to CIB.

“That may not come through immediately in the numbers but over a period of time that will be important to the growth,” he told reporters on a conference call. The improvement in client quality should also limit future losses on bad loans, he said.

The bank reported a pre-tax profit of US$774m for the third quarter, up from US$317m a year ago, mainly due to lower losses from bad debts.

Operating income increased 4% from a year ago to US$3.59bn, but that was slightly down from the previous quarter and was matched by a 4% rise in costs, disappointing investors. Standard Chartered’s shares fell 6% to 700p, their lowest level since April.

Regulatory costs in the latest quarter jumped by a fifth to US$336m and have reached US$935m this year, up 13% on the same stage of 2016, which analysts said is a concern. But Halford said he remained optimistic regulatory costs are set to reduce.

“I‘m hopeful we are now peaking on the regulatory costs,” he said.

Standard Chartered said its common equity Tier 1 ratio fell 15bp last quarter to 13.6%, because 35bp were wiped off the ratio by changes in how the bank calculated potential losses for exposures to some financial firms. It was forced to adjust its internal risk models by the UK regulator. (Reporting by Steve Slater)